U.S. Treasury yields moved higher on Thursday as investors digested a range of comments by Federal Reserve officials and what they could mean for interest rates.
The yield on the 10-year Treasury was trading around 4.18.4% at 6:10 a.m. ET, up around 4 basis points. The yield on the 2-year Treasury was also 3 basis points higher at 4.461%.
Yields and prices move in opposite directions. One basis point equals 0.01%.
It comes as traders increasingly bet on a September interest rate cut by the Federal Reserve, with a reduction in July now seen as highly unlikely.
There is now a less than 5% chance that the Fed’s target range for the federal funds rate, its key rate, will be lowered in July, according to the CME FedWatch tool. However, the odds on a September reduction — from 5.25-5.5% to 5-5.25% — is currently at over 90%.
It comes after Fed Governor Christopher Waller on Wednesday said that he thinks cuts are near, but stressed that he will be watching the data closely in the meantime.
“I believe current data are consistent with achieving a soft landing, and I will be looking for data over the next couple months to buttress this view,” he said in a speech. “So, while I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted.”
New York Fed President John Williams shared similar sentiments in an interview with the Wall Street Journal, while Richmond Fed President Thomas Barkin, speaking at a business roundtable, said he would “proceed deliberately” when it comes to rate cuts.
“Those remarks cemented the idea that a cut was possible at the meeting-after-next in September, but made clear that officials wanted to see continued progress on inflation before moving,” Deutsche Bank strategists wrote on Thursday.
Earlier this week, Federal Reserve Chair Jerome Powell said interest rates would likely be cut before inflation reaches 2%.
“If you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,” Powell said at the Economic Club of Washington D.C. on Monday.
The consumer price index, published last week, showed that prices fell in June on a monthly basis.
Data due Thursday include jobless claims for last week. Economists are forecasting claims of 229,000, according to Dow Jones estimates, up from 222,000 the week prior.
There will also be auctions of 4-week and 8-week Treasury bills.
— CNBC’s Jeff Cox contributed to this report.